Exactly one week ago—when the impending blizzard was but a specter—District leaders, residents, and advocates were shocked at Walmart’s announcement that it would not install stores at two major developments in Ward 7: Skyland and Capitol Gateway.
The ward’s councilmember, Yvette Alexander, says she learned of the company’s decision that Friday around 7 a.m., via a phone call from a Walmart representative. “I was devastated,” she told City Desk on Tuesday. “We’ve been smacked in the face.”
For at least several years, the stores were expected to offer much-needed retail east of the Anacostia River, not to mention jobs. Alexander says they would have been the “catalyst” for additional development springing up in Ward 7, even though many residents “weren’t thrilled” with Walmart entering the D.C. market on account of the billion-dollar company’s “past reputation.”
Now, Alexander says she questions how sincere the company was when it agreed to anchor the Capitol Gateway and Skyland sites; once the leases were signed for those properties—with developers A&R and Rappaport, respectively—it was supposed to be “a go, no question about it.” (Neither firm has returned emailed requests for comment sent earlier this week, on Tuesday night.)
“I’m interested to see where they’re pulling out all over the country,” Alexander says about Walmart. “Are they pulling out of communities similar to Ward 7: predominately African American, below area median income, those that could benefit the most from development?”
“The fight is not over,” Alexander continues. “A deal was made, a deal was broken.”
In a statement provided by a spokesperson Thursday, Walmart said its “agreement with the District to build stores was contingent upon business conditions.”
“We share in the disappointment about this reality but our existing three stores [in Wards 4 and 6] are not profitable and we must focus on improving them so we can take care of our customers and associates,” the statement continued.
What, then, is the District to do? Last Friday, the Office of the Attorney General—led by Karl Racine—met with Mayor Muriel Bowser‘s team to discuss options for how to handle Walmart’s reneging on an agreement brokered a few years back. As of this week, local officials said they were still reviewing those options in close coordination with one another. But their efforts could be limited by the lack of written contracts between D.C. and the company. Deputy Mayor for Planning and Economic Development Brian Kenner reportedly acknowledged that lack at the Advisory Neighborhood Commission 7B meeting held Thursday night.
“We’re continuing to assess all options including legal recourse,” a DMPED spokesperson told City Desk in an email on Tuesday.
Citing confidential meetings, a spokesperson for OAG wrote, also on Tuesday: “What we can say publicly at this point is that the Office of the Attorney General is engaged in ongoing communication with the Executive Office of the Mayor, and we are continuing to wrap our arms around this very complex issue.”
If the District were to sue Walmart, such action could arguably affect the company’s business strategy in regards to remaining and expanding in D.C. Already, though, some labor advocates seem to be taking Walmart’s backing out of Ward 7 as an opportunity to push for greater workers’ rights as well as the welcoming of brands that have perhaps-less-fraught labor records.
“Now it’s time for a new development plan for Skyland, for Capitol Gateway, for Ward 7, and for east Washington that puts residents and good jobs first,” said Rev. Kendrick E. Curry, senior pastor for the Pennsylvania Avenue Baptist Church, in a statement last Saturday. “It’s clearly time to invest in small businesses and grow a culture of local ownership and living wages.”
Ari Scwhartz, an organizer for the advocacy group DC Jobs With Justice, echoed that sentiment earlier this week. Although DCJWJ doesn’t have a position on whichever businesses would be “a better choice” for Skyland and Capitol Gateway, Schwartz pointed out, residents of Ward 7 deserve “community-benefits agreements” through which they could negotiate for concessions.
“What [Walmart] did instead with [then-Mayor Vince] Gray‘s administration was [to establish] a non-binding community-partnership initiative,” Schwartz recalls. “It was essentially a handshake deal with no teeth, that they would attempt to hire locally, that they would attempt to do all these things for the community.”
According to Alexander, the District never signed an explicit contract with Walmart stating the company would open a certain number of stores in this neighborhood or that. But over time, “everyone came to terms with the locations,” she says. “The leases had been signed for the two [Ward 7 developments]. And Walmart agreed to build them with completely their own resources.”
So if D.C. pursues a suit against Walmart, one likely strategy would be to base it on verbal agreements and the relevant case law. At-Large Councilmember Elissa Silverman says she recently saw Racine, who told her his office is examining the avenues for making a breach-of-contract lawsuit founded on the validity of oral pacts. “He’s pumped about this, apparently,” Silverman said.
“It’s unfortunate what happened for several reasons,” Silverman, who joined the Council last year, added of Walmart’s decision. “Number one, I think it exposes how we have sort of a hope-and-a-prayer approach toward economic development, in that we take the good word of Walmart when they’re acting in their economic interest. We need to start acting in our economic interest.”
Other city leaders are also thinking about the District’s economic future. At-Large Councilmember David Grosso says he was “not the least bit surprised” that Walmart backed out of Ward 7 based on their previous behavior nationally, adding that he’d create financial incentives for “high-quality” businesses that are “real community players” to take root east of the Anacostia.
“Some people say you shouldn’t [subsidize them],” Grosso explains. “You know what? If that’s what it takes to provide a sustainable business there, then we should do it.”
However the situation between Walmart and the District ultimately plays out, Council Chairman Phil Mendelson argues D.C. must “protect its investment” in planned developments and ensure that the setback related to the Skyland project is temporary.
“I would hope there’s something in writing between the District and Walmart and [it] constitutes a contract and provides for liquidated damages,” Mendelson said Monday morning. “I don’t know if that exists as I’m talking to you. The bigger question with regard to Skyland is what we’re going to do to pick up the pieces and keep moving forward. We put a lot of money into Skyland because the market will not bear it otherwise.”
“I think it’s a challenge right now,” he said.
Update 12:45 p.m.: After chatting briefly about D.C.’s snow prep on The Politics Hour this afternoon, Deputy Mayor Kenner said the District’s “primary focus right now is to find additional retail tenants” for the Capitol Gateway and Skyland sites, which had “interest” in them before Walmart signed leases. In both locations, Kenner said, Walmart’s stores were supposed to occupy more than 100,000 square feet, meaning whatever ultimately anchors the two Ward 7 developments could be other large-scale stores—like Lowe’s, Target, Costco, and Wegmans—or “a combination of small tenants.”
“The city does not have an actual agreement with Walmart,” Kenner said in response to a caller who asked why the company had not given D.C. any forewarning about the decision it officially announced last week. “Walmart has an agreement with development entities. In turn, the development entities look for potential retail anchors. Each of the development entities had signed agreements with Walmart; [thus there are] legal and financial implications of breaking those leases.”
The deputy mayor continued: “It’s one of the things someone told me the other day—you can’t sue somebody to open. You can sue for damages and other things.”
Asked what he’s learned from the current situation, Kenner cited Walmart’s nationwide pullback from urban markets, which may have presented the company with “a different business model from what they anticipated.” He also noted that companies pulling out of the D.C. market wasn’t entirely new: In the 1990s, it was in fact fairly “common… We just haven’t felt it in a while.”
Later, asked by a second listener whether D.C. “should have known” about the risk of Walmart pulling out because the company had not signed a community-benefits agreement, Kenner pointed out that such pacts are unusual among big retailers.
“Walmart entered into a community-partnership initiative [stipulating that it would donate] $20 million to [local] nonprofits,” Kenner explained. “They’re about $15 million into that, [around] hunger, food, and some other key initiatives.”
“They told us verbally they intend to honor that commitment and reach $20 million,” he said.
Due to an editing error, this post originally stated that one of D.C.’s Walmart stores is located in Ward 5.
Photo by Darrow Montgomery